Friday, July 20, 2007

Minnesota has four law schools. U.S. News and World Report ranks one of them No. 20 in the nation, two of them as "Tier 3" and one as "Tier 4." These rankings have riled some deans and been criticized as subjective and unreliable in academic circles. Yet they have real-world implications on how some perceive the law school and on the number of applications it gets.

In the next Minnesota Lawyer, we take a look at the law-school ranking controversy and the response locally. Watch for it in Monday's paper!

Unable to reach an accommodation with its former landlord, the Rider Bennett law firm, which closed its doors at the end of May, is seeking Chapter 11 bankruptcy protection.

The petition, filed on July 12, was accompanied by motions for expedited hearing and other relief that would allow the firm to pay its remaining employees and other expenses. Rider Bennett has retained the Minneapolis law firm of Fredrikson & Byron to represent it, paying the firm a $75,000 retainer, which is held in trust.

According to the petition, Rider Bennett will have funds available for distribution to unsecured creditors, which number between 100 and 199. It lists both assets and liabilities of $100,000 to $100 million, with more detailed financial information to be forthcoming.

According to the motion papers, after the firm decided to cease operations it entered into a forbearance agreement with its bank, American Bank of St. Paul, to wind up on terms designed to maximize the value of the debtor’s assets.

The firm alleges that its landlord, City Center Associates, through its agent, Brookfield Properties, has sought to interfere with and impede the liquidation process.

“Brookfield’s litigation tactics have so far failed to derail the winding up but have resulted in the incurring of substantial, unnecessary expense and diverted the firm’s attention from its principal goal -- maximization of the value of its assets for all creditors. This case is brought in part to reduce the diversion of resources caused and likely to be caused by Brookfield’s tactics,” Rider argued in its motions.

Brookfield has reportedly sued Rider Bennett for about $11.5 million for rent. Brookfield also asked the court to appoint a receiver. Rider Bennett’s filings indicate that it will seek bankruptcy court approval to reject the lease, but concede that Rider owes a disputed, unliquidated amount for rent.

“We’re hoping to reach agreement with Brookfield on a plan of liquidation,” said Clinton Cutler, who is one of the bankruptcy attorneys representing Rider.

Rider decided to file the voluntary bankruptcy so that the landlord’s lien could be avoided as a preferential transfer, according to Steven Plunkett, the former managing partner of Rider. “Part of our role is to make sure all our creditors are treated fairly,” Plunkett said. The firm’s bank supports the filing, he added.

The strategy makes sense, said Madison, Wis., attorney James Sweet. The purpose of pursuing a Chapter 11 liquidation rather than a Chapter 7 is to allow the debtor to remain in control of the process, rather than have a trustee in charge, he explained. By filing the bankruptcy petition within 90 days of the lien, the firm can avoid the transfer and the landlord should be unsecured, he said.

Rider is also facing a $12 million fraud claim in Hennepin County District Court stemming from a case where a former Rider lawyer represented a husband in a divorce. (See, “Rider Bennett faces $12M fraud claim” in the May 21, 2007, edition of Minnesota Lawyer, password required.) The plaintiff in that case maintains that the Rider lawyer participated in a fraudulent effort to undervalue the husband’s business.

Plunkett said that the fraud claim was immaterial to Rider’s decision to file bankruptcy. The firm is represented in the fraud action by Lewis Remele of Minneapolis, who has previously indicated that the claim may be a casualty of the firm’s closure. Although the firm carries insurance to indemnify it against a negligence claim, there is a substantial retention amount that the firm would have to pay, said Remele.

Minneapolis attorney William Skolnick, who represents the plaintiff in the fraud case, said he had not decided whether to seek relief from the automatic stay imposed by the bankruptcy filing.

Rider’s complete schedules are due to the bankruptcy court on July 27. It has filed a list of creditors holding the 20 largest unsecured claims, which (excluding Brookfield and the fraud claim) total a little more than a half million dollars. As of the filing of the petition Rider owed its secured creditor, American Bank, a principal amount of $3.7 million plus interest, fees and costs.

The firm has asked the Bankruptcy Court to approve its use of about $40,000 to pay compensation to employees winding up t he company and another $73,000 to pay other expenses necessary to prevent irreparable harm to the estate.

The total value of the firm’s assets securing bank loans is about $11.3 million. Although some of the firm’s assets are contingent, “the Debtor believes that the asset value exceeds the amount owed the Bank by a significant amount,” the firm’s filings states.

The demise of the venerable law firm has been a sad event for the Minnesota legal community, but Plunkett was sanguine about the latest development.

A recent piece in The New York Times about a Manhattan law firm's charity program has been vexing me, and it seems I’m not alone.

The Times article (fourth item down) highlights a Chow for Charity program at Simpson Thacher & Bartlett. There, summer associates get a $60 lunch allowance when they meet with firm lawyers. But if an associate spends just $15, the firm will donate the remaining $45 to a nonprofit legal organization.

Hmmm…

The essence of charity—to me at least—requires a conscientious act of selflessness. And Chow for Charity doesn’t pass muster.

The $45 donated to Legal Aid is money that the firm had expected to pay anyway, so there's little conscience. And eating a $15 meal versus a $60 meal hardly constitutes sacrifice—someone who trades extravagance for abundance shouldn't sit at the same table as, say, a Red Cross or Children's Law Center volunteer.

To be fair, Simpson Thacher has other, meaningful pro bono and Legal Aid programs. And I heartily applaud all attorneys who donate time and money for the greater good.

But Chow for Charity is not true charity—it's a sideshow, like Crocs or Adam Sandler movies. I'm glad that our firms here in Minnesota have better sense.

Of course, BlackBerry users already had access to the Web through their cellular provider’s EDGE network—and will continue to have that option. But with the 8820, people will be able to connect to the Internet at any number of wireless hotspots across the country.

The 8820 is also the company’s thinnest phone, sporting a QWERTY keyboard, 320x240 display, trackball navigator and built-in Global Positioning System—not to mention usual features such as Bluetooth and a MicroSD slot.

Wireless provider AT&T will begin carrying the BlackBerry 8820 later this summer. RIM hasn’t released a price yet.

Last week, we got an interesting comment on the departures at the AG’s Office, which have been discussed extensively on this blog:

“Experienced attorneys continue to leave the AG's Office, and with few exceptions, they are being replaced by inexperienced attorneys. More important still, because of the departures, these new attorneys, whatever their innate abilities, have few mentors to guide them. Some divisions are decimated. There is now no Consumer Enforcement division at the AG's Office. … Consumer cases are being passed off on lawyers in other divisions who are unable to handle them, and older cases are being settled for next to nothing or are being dropped altogether. Every civil defense firm in Minnesota now knows that the best way to handle an AG investigation or lawsuit is to string it out, not settle at a high cost. Eventually the AG will throw in the towel.”

The commenter also takes the media to task for its coverage of the AG’s dispute:

One more point. The local media needs to do its job. The story of the AG's Office did not end with the departure of Mike Hatch. Two months ago, when the story broke, former deputies and division managers with firsthand knowledge of the actions of Hatch and Swanson (actions that would shock the complacency of Minnesotans who like to boast that they live in a good-government state) were beginning to talk. Inexplicably and inexcusably, the press stopped asking questions. ….(Click here for the full text of the comment)

There are a couple of issues implicated in this comment. The departures for the first few months of 2007 were fairly well chronicled in the articles on the issues at the AG’s Office in late April and early May. Minnesota Lawyer checked in with the union probably about a month after Hatch left, but it was reticent to say much at that point other than that it was then still collecting signatures. It has been mentioned here and elsewhere that the Consumer Enforcement Division has been particularly impacted by the departures.

It’s always a balance how much you update a story. One wants to give the current AG, Lori Swanson, a chance to clean things up now that the morale issues have come out into the light and her old boss, Mike Hatch, has left. Swanson is a constitutionally elected officer who still has three-and-a-half years left in her term, so one would hope she will now take advantage of that time to carve out her own legacy. How she deals with the unionization attempt and whether she is able to restore morale will go a long way in determining what kind of employees the office will be able to attract and retain. In turn, good employees can do a lot of good things that will help restore her office’s reputation.

While the office has lost a lot of high-level talent, there are still many talented folks who remain. The situation needs to be set right before any more of those good folks escape. This task will not be easy. Once you begin with a rocky start, regaining the trust and confidence of your subordinates can be a Herculean task. But it’s not impossible. And, despite the obvious obstacles, we still have hope that Swanson will be able to rise to the occasion. And we will, of course, continue to monitor the situation at the office.

That said, I must agree with the commenter’s second point that the media has not done its job in handling and following up with the issues at the AG’s Office. I thought the Pioneer Press did an excellent job reporting the initial story, and Ruben Rosario had an excellent and classy column calling for Hatch to move on. However, as the commenter mentions, there was little follow up after Hatch left. The Star Tribune news coverage, on the other hand, has been anemic throughout, which is disappointing to say the least given that it is the state’s largest newspaper. The only time I recall the Star Tribune editorializing on the issues at the AG’s Office was in a rant by columnist Nick Coleman referring to Hatch throughout as “mad Mike” -- and that wasn’t even published until after Hatch announced he was leaving. (If the AG’s Office had been run by Republicans, one wonders whether the Star Tribune’s editorial board would have responded with such deafening silence.) Sadly, most of these events occurred before the Star Tribune substantially reduced its newsroom size, so staffing excuses are not available.

We at this blog and at Minnesota Lawyer will continue to keep a vigilant eye on what is happening at the AG’s Office while striving to give the office a fair chance to right itself. All of you who participate in this blog have been a valuable part of our efforts, and we encourage you to continue to keep us updated.

The legal thread in this post is, admittedly, a thin one, but it provides an excuse to lament the closing of a unique and wonderful Minnesota business.

Shinders, the newsstand/bookstore/collectibles dealer that was a 91-year presence throughout the Twin Cities, closed its few remaining stores Monday after years of apparent mismanagement by Robert Weisberg, the attorney who bought the chain from the Shinder family (to whom he was related by marriage) in 2003.

The business began falling apart last year when Weisberg was arrested after police found methamphetamine, Ecstasy, needles and a .40-caliber rifle in his van. Weisberg failed to appear for at least two recent court appearances, and also faces disciplinary action before the state Office of Lawyers Professional Responsibility board for negligence in his law practice, which closed this year.

The chain was losing $100,000 per month when a court-appointed receiver turned control over to its banker, Wells Fargo. The bank liquidated some of the company's assets to repay a pair of loans to Weisberg originally valued at $1.7 million.

Shinders got its start in 1916 with three Shinder brothers - Harry, Daniel and Al - selling newspapers on the street. Many of us recall the pair of Shinders stores that sat on either end of Block E (back when that block, in the middle of which sat Moby Dick’s bar, was considered the “dangerous” part of downtown Minneapolis).

Between the rows upon rows of specialty magazines, oddball books, exotic and brilliant comic books and graphic novels, out-of-town newspapers, piles of sports cards – and yes, the back room of adult publications – there’s never been a better place to kill a lunch hour.

Tuesday, July 17, 2007

The following is the text of a resolution that the Star Tribune's Newspaper Guild/Typographical Union passed overwhelmingly today (of about 110 voting, only two voted against it):

"We, the journalists of the Star Tribune, call on Par Ridder to resign as publisher. We believe the unethical actions to which he admitted in court have damaged the Star Tribune's credibility and integrity and undermined our ability to hold public figures accountable for their actions. For the good of the Star Tribune and the community it serves, we believe he should step down."

The Strib article on the subject quotes one of the paper's own reporters, Dan Browning, as saying, "People don't take us as seriously." Browning went on to call Ridder's actions "corrosive" to the newspaper's reputation.

Meanwhile, across the river, the Pioneer Press has announced another round of buyouts as its advertising revenues continue to slide. The paper wants 30 individuals to accept its buyout offer this time -- with 15 of those staff reductions expected to come in the paper's newsroom. Layoffs are possible if there are an insufficient number of buyouts.

Love blossomed in a trial last year between alternate juror No. 3, Traci Nagy, and juror No. 6, Jonathan Cinkay.

The (New York) Daily News reported Sunday that the two made goo-goo eyes on the first day of the trial. Fellow jurors encouraged Nagy, a 36-year-old market analyst, to date Cinkay, 33, a physical therapist.

After the trial, Cinkay said he called Nagy "as soon as I got out the door" and proposed by year's end. Queens Supreme Court Justice Daniel Lewis, who presided over the case, is to marry them next month. (The defendant, by the way, was convicted.)

Our condolences to the family and friends of Judge Thomas Forsberg, who died Sunday at the age of 80. Forsberg was one of the earliest Court of Appeals judges, joining the court in 1984. He retired in 1995 but continued to serve the court under the rule allowing retired judges to handle cases by appointment. A complete obituary is available by clicking here.

In recent years, Forsberg wrote several Court of Appeals opinions of particular interest to attorneys, including the following:

a 2003 decision holding that the billing records of Robins, Kaplan, Miller & Ciresi in the tobacco litigation were not protected by attorney-client or work-product privilege;

a 2004 decision finding that an assignment of proceeds from a lawsuit was champertous; and

a 2005 decision allowing the former Cottonwood County attorney to sue the county for defamation following an investigation into allegations made by employees.

A D.C. Superior Court judge rejected a motion yesterday to reconsider her ruling against the man who sued a dry cleaner for $54 million.

Judge Judith Bartnoff said Roy L. Pearson Jr. did not present any new argument or authority in asking her to reconsider her decision in the suit, which involved a pair of pants and gained national attention.

***

Personally, I think it's time for this particular plaintiff to put a zipper on it ...

Monday, July 16, 2007

I am amazed every time I walk into the Minnesota Judicial Center at the total lack of adequate security. There are no metal detectors; there is no bag screening. You just walk through an unlocked door, breeze by the receptionist and stroll free as you like to the courtroom to hear, for example, an appeal argued in a first-degree murder case. There sitting before you is the entire state Supreme Court. You suddenly reach into your bag and pull out ... a reporter's notebook! But you get the idea, that could just have easily been a weapon, and I don't think those robes would have afforded the justices much protection.

Minnesota Lawyer ran a story this week on the attempt to beef up security at the state's appellate courts. ("Appellate courts await more security," subscriber password required.) The Legislature in its wisdom saw fit to nix from the courts' budget the $500,000 needed to fund the metal detectors. However, to take a phrase from Monty Python's Holy Grail, the idea is "not quite dead yet." The courts are looking at creative ways to squeeze out the funding they need and many think they will do it given the importance of this issue.

But, of course, even if that is the case, that means the courts will lose $500,000 out of another pocket. Given all that is going on in the world in general and in our courts in particular, it is perplexing to me why security was treated so cavalierly by lawmakers in the budgeting process.

Not to brag -- OK, OK, to brag a little -- readers of this blog found out on July 2 that Hennepin County stopped requiring Social Security numbers as the result of the lawsuit brought by the couple. (Click here for the July 2 post.)

When I spoke with Minnesota Supreme Court Justice Paul Anderson late last week, he was about to embark for a little R&R in Wyoming. Well, maybe not R&R, since his vacation plans include trekking around on a mountain bike. Not bad for a 64-year-old guy who had a hip replacement not too long ago, he pointed out during the course of our conversation. The justice says he may get some photos from the road, which may find their way into an upcoming edition of Minnesota Lawyer. In the meantime, we wish him good luck on the trip. (For obvious reasons, we won't say break a leg ...)